Is a correction coming for FuelCell Energy shares?
Shares of hydrogen-linked play FuelCell rose last week on a revenue boost, well surpassing analysts’ price targets.
Revenue surpasses expectations
FuelCell Energy (FCEL), which designs, manufactures and operates ultra-clean fuel-cell power plants, last Thursday (21 January) morning announced financial results for its fiscal year ended 31 October 2020.
It recorded a loss per share of US$0.08 for the fourth quarter - worse than analysts’ forecasts of losses of around US$0.04 per share.
On the other hand, its total revenue in Q4 beat Wall Street’s expectations, improving 54% year-on-year to US$17 million. This jump was led by a 623% increase in service and licence revenues, as well as a 48% growth in contract revenues in advanced technologies.
FuelCell CEO Jason Few pointed out ‘the significant market opportunities that we believe lay before us with our proprietary technologies’, as the company is developing innovations in distributed hydrogen, long-duration storage and carbon capture.
Investors thus shrugged off the quarterly loss and focused on the revenue growth and opportunities ahead, driving FCEL share prices higher last week.
The alternative-energy company’s stock closed 3.2% higher on Thursday at US$17.29, and gained another 4.9% to finish Friday at US$18.13.
However, the shares had a lacklustre showing on Monday (25 January), dipping 0.4% to close at US$18.05.
Analysts set higher price targets
While none of the six analysts covering FCEL’s stock have a ‘buy’ recommendation following its staggering price rally, some issued higher price targets.
Their average 12-month target price stood at US$11.90, with four rating FCEL a ‘hold’ and two recommending ‘sell’ as of Monday, according to Bloomberg data.
Jefferies last Friday increased its target price to US$15 from US$11, and kept its ‘hold’ call.
JPMorgan analyst Paul Coster reiterated his ‘underweight’ rating on Thursday with an unchanged US$10 target. Two weeks ago, Coster downgraded FuelCell, viewing the shares as ‘richly valued’. The counter rallied nearly 800% last year, driven by investor mania amid surging demand for clean fuels.
Canadian brokerage Canaccord Genuity last Thursday raised its target price on FuelCell from S$8.50 previously to US$15, indicating a potential downside of 10.5% from last Wednesday’s closing price of US$16.76.
Canaccord, which maintained its ‘hold’ opinion on the stock, pointed out that FuelCell needed to grow into its valuation following the recent runup in its shares, although the fourth-quarter revenue had slightly exceeded market expectations.
Meanwhile, Craig-Hallum Capital analyst Eric Stine more than doubled his target price to US$4, from US$1.50, but reiterated his ‘sell’ call.
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